SMEs owed more than £500 billion in late payments

Small and medium businesses in the UK are owed over £500 billion in outstanding invoices, according to a new study. The Lloyds Bank Commercial Banking Business in Britain study found that the problem of late payments is mounting, with the amount owed representing an increase of more than 70% in just two years.

The problem also looks set to worsen as the year progresses. Nearly a third (30%) of respondents expected more of their customers to ask for deferred payment terms over the next six months.

Businesses in Sussex, Surrey, Hampshire and Dorset were owed the most in late payments with an average of £109,000 in outstanding invoices. Those in Scotland were owed the least, at an average of £79,000. Nearly a third of all businesses (31%) said that late payments are affecting their cashflow.

The report follows another from 2015 that revealed that almost a quarter of all SMEs in the UK had at some point been pushed into financial crisis by late payments.

That research, commissioned by electronic invoicing network Tungsten, found that half of all invoices owed to smaller businesses were overdue and that 23% of SMEs had been close to company insolvency as a result. The Federation of Small Businesses (FSB) said that late payments was one of the top 10 issues that UK SMEs would face over the next five years.

It wasn’t all bad news however. The Lloyds Bank study found that, while the amount owed to SMEs had grown, so had the amount of assets they owned. UK SMEs owned nearly £2.5 trillion in assets – a 220% increase over the £770 billion owned in 2014.

Crucially, the report says, these assets could be used to unlock further funding that could allow further growth and help overcome cashflow issues. Alternative funding types such as invoice finance or asset-based lending could allow businesses to take the opportunities that may exist, while ignoring such financing options could seriously hamper growth.

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